FINANCIAL MARKETS : Dow Tacks On 9.86, Led by the Cyclicals

Meanwhile, the dollar rose sharply against the German mark but eased slightly against the Japanese yen after last week's surge.

In the stock market, the Dow Jones industrial average added 9.86 points to 4,693.32 as winners topped losers by 12 to 10 on the New York Stock Exchange. Trading was typically slow for a summer Monday.

Analysts said stocks were supported by a calm bond market. Despite the Treasury's plans to sell a record $42.5 billion in new bonds this week, yields eased.

The 30-year Treasury bond yield dipped to 6.88% from 6.90% on Friday.

Some bond traders said they are optimistic that Japanese investors will be major buyers at the Treasury auctions this week, thanks in part to the dollar's recent strength against the yen. A rising dollar boosts the value of foreigners' U.S. holdings.

Last week, the Japanese government announced steps aimed at encouraging Japanese institutional investors to buy more foreign securities as a way of further weakening the mighty yen.

"It's a psychological plus for the Treasury market," said Tom Carpenter, economist at ASB Capital Management in Washington.

The Treasury will sell new 3-year notes today, 10-year notes on Wednesday and 30-year bonds on Thursday.

However, the dollar on Monday couldn't sustain last week's rally against the yen. It closed at 91.39 yen in New York, down from 91.43 on Friday.

But the greenback gained against the German mark, closing at 1.409 marks, up from 1.397 on Friday.

Rumors have circulated since Friday that Germany's Bundesbank might cut short-term interest rates this week. Traders predict the central bank on Wednesday will reduce the 14-day securities-repurchase agreement rate, also known as the repo rate, a barometer of short-term rate trends in Germany.

That could be followed by a cut in the central bank's official discount rate Thursday, some economists say.

In theory, lower German rates would weaken the mark by reducing the attractiveness of mark-denominated bonds.

On Wall Street, analysts said the market's strength Monday was concentrated in industrial stocks tied to the economy's swings.

The clear message was that some investors believe the weak U.S. economy could be getting a second wind.

"Consumer-cyclical stocks, like autos, housing and retailers, are starting to come back," said Hugh Johnson, chief investment strategist at First Albany Corp. "The market is sending us signs that the economy is not about to roll over and die."

Among the market highlights:

* Cyclical issues on the rise included Alcoa, up 1 to 57 5/8; Goodyear, up 1 1/8 to 43 1/4; International Paper, up 1 1/8 to 86 3/8; Union Carbide, up 7/8 to 36 3/4; Alumax, up 1 5/8 to 35 1/8; Olin, up 2 1/2 to 61 1/8, and Superior Industries, up 1 1/8 to 34.